It can be disheartening for investors when stock values suddenly decline, but stock prices are not always indicative of a company’s long-term value. Warren Buffett accumulated his wealth by investing in companies that were undervalued in comparison to their true worth.
Historically, investors have achieved their best returns by purchasing shares of reputable companies during bear markets. The article identifies two stocks that are recommended for purchase today, with the potential for delivering strong returns over a lifetime.
1. Amazon
Amazon has built a dominant online retail empire through its customer-first strategy, which has also established a significant presence in cloud computing with Amazon Web Services. The company has diversified its revenue streams across e-commerce, cloud computing, advertising, and third-party merchant services, generating $637 billion in revenue last year, primarily from nonretail services. This diversification not only provides multiple growth avenues but also enhances margins. Amazon’s net income doubled last year to $59 billion, and analysts predict the earnings will grow by over 20% annually in the coming years.
Amazon continues to reinvest its profits into new ventures such as artificial intelligence services, Amazon Pharmacy, satellite internet service (Kuiper), and Prime Air drone deliveries. This focus on innovation underscores a corporate culture centered on maintaining its competitive edge and creating shareholder wealth. Over the years, Amazon’s stock has delivered substantial returns. Although future returns may be more modest due to the company’s size, Amazon remains a robust enterprise to anchor any portfolio. The recent market downturn has lowered the stock’s valuation to an attractive 16 times the company’s operating cash flow, marking the lowest multiple it has traded at in 15 years, indicating potential undervaluation.
2. Uber Technologies
Uber Technologies is another company that is innovating and offering essential services to the economy. Uber has evolved beyond traditional ride-hailing services, showing potential to become a comprehensive destination for transportation needs. The company has demonstrated resiliency and significant growth potential with robust financial performance in 2024. Uber now boasts over 171 million monthly active platform consumers, with growth observed in delivery services (Uber Eats) and mobility (ride-hailing). Strong demand for rides and deliveries contributed to an 18% increase in revenue last year to $44 billion.
The expanding user base provides substantial data, which Uber leverages to optimize pricing and identify emerging markets. For instance, delivery services have proven effective in attracting new customers to Uber’s platform. In the fourth quarter of 2024, 61% of first-time delivery customers were new to Uber.
Similar to Amazon, Uber continues to invest in expanding its offerings and maintaining its market edge. Earlier this year, it announced a partnership with chipmaker Nvidia to develop autonomous driving technology. It is also expanding its market with specialized ride services like Uber Teens and Uber Health for patient transportation.
Uber’s momentum could potentially elevate the stock in the coming years, and its efforts to broaden its market with new services may yield wealth-building gains over the next decade and beyond. Analysts anticipate Uber’s earnings to grow at an annualized rate of 35% over the coming years, with shares being available at a reasonable valuation of 20 times this year’s earnings estimate.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. John Ballard holds positions in Nvidia. The Motley Fool holds positions in and recommends Amazon, Nvidia, and Uber Technologies.
